Stion To Aim for IPO, Snags $700M in Sales

Solar panel startup Stion has launched an ambitious plan to build a 500 MW factory, which will likely be funded in part by raising $100 million to $150 million through an initial public offering in 2012, Stion CEO, Chet Farris, told us.

The San Jose, Calif.-based startup plans to start its manufacturing ambitions by building a 100-MW factory in Hattiesburg, Miss. Mississippi is offering Stion a $75 million loan plus tax and job training incentives.

The overall cost of the factory project, including manufacturing equipment, operational expenses and improvements to get the factory ready for production (such as improving the water treatment system), will be about $125 million, according to Farris, who spoke to us by phone from Hattiesburg. The company mentioned a $100 million investment for the factory plan in its press release, but that amount is for production equipment and factory improvement only, he added.

Stion makes solar panels that use copper, indium, gallium, selenium and sulfur (CIGSS) to convert sunlight into electricity. These materials are sandwiched by glass to form each panel. It’s one of a crop of Silicon Valley startups that aim to popularize solar panels with these alternative materials to the more common way to make solar panels with crystalline silicon. Stion’s peers include MiaSole, Nanosolar and Solyndra.

Stion is on a path to reach commercial production with a lot less private capital than some of its solar startup peers. Stion raised a D round of $70 million by June 2010, including $50 million from Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chip manufacturer. Before that, it had raised $44.6 million in equity from investors including Khosla Ventures, VentureTech Alliance and Lightspeed Venture Partners. Stion will use the bulk of the $70 million round to fund the Mississippi factory.

The company completed a 10-MW pilot production line in San Jose last year and has employed two strategies to keep its expenses down. First it decided against developing proprietary production equipment. While certain equipment it buys still needs some customization, it uses off-the-shelf parts and used sputtering and lamination machines (for the pilot line), which can both be far cheaper than engineering and building tools from scratch.

The strategy is to make sure its manufacturing process is ready for mass-producing products without major glitches before carrying on expansion plans, he said. “If you go and raise a lot of money and you have a factory and process that isn’t re-producible, and the yields aren’t good, then it creates a lot of aberrant behavior,” Farris said. “Our view was to be capital efficient from the get go.”

Stion plans to start getting the Mississippi factory ready within a couple of weeks and hopes to start operating the production equipment by the third quarter of this year. By the end of this year or early 2012, the company should be mass-producing solar panels, Farris said.

To expand the factory to 500 MW by 2016, Stion plans to raise at least another round of money, and hopes to do an IPO of $100 million to $150 million in 2012, Farris said.

By putting the Mississippi factory plan in place, Stion isn’t going forward with its original plan to expand its San Jose factory to 100 MW, Farris said. The company announced the San Jose factory expansion last year and was due to receive a $5 million loan from California to help finance it. The negotiation with the state over the use of the money is ongoing.

The company has been making solar panels at 110-watt, 120-watt and 130-watt ratings (see spec sheet). Stion’s modules received the necessary UL and IEC certifications in the last quarter of 2010 in order to sell its products to the U.S. and European markets, Farris said. The company will likely phase out the 110-watt panel in the next six months as it boosts the efficiencies of it product line. The 130-watt panel has achieved an average efficiency of 11.8 percent

Stion hasn’t disclosed the names of its customers. The startup has inked about 500 MW of sales agreements, which are valued at $700 million and will be delivered over the next five years, Farris said. In addition, the company has signed letters of intent and memoranda of understanding for another 500 MW worth more than $600 million for the same delivery period. Most of the panels will go to U.S.-based customers.

TSMC, which signed technology licensing and supply agreements with Stion last year, will make panels for Stion to sell as well.

Stion is currently developing a tandem-junction module that can achieve more than 15 percent efficiency, said Farris, who declined to disclose more details. Tandem junction generally refers to additional layers of semiconductors to boost sunlight-to-electricity conversion.

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